Equity Commitment Letter for the United Kingdom

Equity Commitment Letter Template for England and Wales

An Equity Commitment Letter is a legally binding document under English and Welsh law where an investor or sponsor commits to providing specific equity funding for a transaction or investment. The document outlines the terms, conditions, and mechanics of the equity commitment, including the commitment amount, funding conditions, and termination rights. It serves as a guarantee of funding availability and is often required by other transaction parties or lenders as evidence of financial backing.

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What is a Equity Commitment Letter?

An Equity Commitment Letter is commonly used in acquisition financing, private equity transactions, and corporate restructurings under English and Welsh law. The document provides certainty to transaction parties regarding the availability of equity funding and typically accompanies other transaction documents such as purchase agreements or facility agreements. The letter details the specific amount committed, conditions for funding, and mechanics for drawing the commitment. It's particularly important in leveraged buyouts where lenders require assurance of equity contributions before providing debt financing.

What sections should be included in a Equity Commitment Letter?

1. Sender and Recipient Details: Full legal names and addresses of the parties making and receiving the equity commitment

2. Reference Transaction: Identification and description of the underlying transaction requiring the equity commitment

3. Commitment Amount: Clear statement of the specific amount being committed, including currency and any calculation mechanisms

4. Conditions Precedent: List of conditions that must be satisfied before the commitment becomes effective

5. Funding Mechanics: Detailed process for how and when the committed funds will be provided, including timing and payment instructions

6. Termination Provisions: Circumstances under which the commitment may be terminated and the process for termination

What sections are optional to include in a Equity Commitment Letter?

1. Representations and Warranties: Additional assurances about capacity, authority, and other matters relevant to high-value or complex commitments

2. Regulatory Approvals: Details of required regulatory clearances and their impact on the commitment

3. Security Provisions: Details of any security or collateral backing the commitment

What schedules should be included in a Equity Commitment Letter?

1. Corporate Authorization Evidence: Board resolutions or other documentation proving authority to make the commitment

2. Form of Funding Notice: Standard template to be used when requesting funds under the commitment

3. Transaction Timeline: Schedule of key dates and deadlines relating to the commitment

Authors

Alex Denne

Head of Growth (Open Source Law) @ Genie AI | 3 x UCL-Certified in Contract Law & Drafting | 4+ Years Managing 1M+ Legal Documents | Serial Founder & Legal AI Author

Jurisdiction

England and Wales

Publisher

Genie AI

Cost

Free to use
Industries

Companies Act 2006: Primary legislation governing company operations, including provisions for share capital, allotment, directors' duties, share issuance, transfer requirements, and corporate capacity and authority

Financial Services and Markets Act 2000: Regulates financial services industry, covering financial promotion restrictions, regulated activities, and investment restrictions and exemptions

Contract Law Principles: Includes Law of Property (Miscellaneous Provisions) Act 1989, common law principles of contract formation, consideration requirements, and capacity to contract

Financial Collateral Arrangements (No.2) Regulations 2003: Regulations governing financial collateral arrangements and their enforcement

Money Laundering Regulations 2017: Anti-money laundering requirements including due diligence and source of funds considerations

Stamp Duty Legislation: Tax regulations concerning stamp duty and stamp duty reserve tax implications for share transfers and documentary requirements

Market Abuse Regulation (MAR): Regulations concerning market abuse, particularly relevant for listed companies and handling of inside information

Corporate Insolvency and Governance Act 2020: Legislation governing corporate insolvency, restructuring, and the enforcement of commitments during financial distress

FCA Regulations: Financial Conduct Authority regulations applicable to financial services and regulated activities

Stock Exchange Rules: Specific rules and requirements for listed companies on relevant stock exchanges

Teams

Employer, Employee, Start Date, Job Title, Department, Location, Probationary Period, Notice Period, Salary, Overtime, Vacation Pay, Statutory Holidays, Benefits, Bonus, Expenses, Working Hours, Rest Breaks,  Leaves of Absence, Confidentiality, Intellectual Property, Non-Solicitation, Non-Competition, Code of Conduct, Termination,  Severance Pay, Governing Law, Entire Agreemen

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